SECTION [D]: PROSPECTS OF AUTOMOBILE MANUFACTURERS, DISTRIBUTORS AND DEALERS

It is crucial to draw a line between "distributor" and "dealer". "Distributor" is a level higher than "dealer" in the automobile distribution chain. In most cases, distributors deal directly with the vehicle manufacturers and dealers will then source their motor vehicles from the distributors. Dealers are also commonly known as retailers.

Another point that is worth noting is that in Malaysia, to import completely-build-up (CBU) vehicles, Approved Permits (AP) are needed regardless of whether a company is a sole distributor for a certain marque or not. This means that in reality, the AP overrides the "sole distributor" status. An AP holder need not be a sole distributor of a certain marque to import CBUs of that particular marque. To add to the irony, most of the time, the sole distributor for a certain marque has to buy the CBUs of the marque that it holds the distribution rights to, from the AP holders.

[1]. Cycle & Carriage Bintang (CCB, 2925)

Nature of business: Distribution and retailing of motor vehicles.
Major shareholder/s: Jardine Cycle & Carriage Ltd, EPF.

Table 2: Summary of performance (RM mln) - 31 December

Listed on the KLSE as far back as 1977, Cycle & Carriage Bintang (CCB) is mainly involved in distributing and retailing motor vehicles. It is [1]. The sole distributor of Mazda and Peugeot motor vehicles in Malaysia, and [2]. A dealer of Mercedes Benz, Smart and Fuso motor vehicles in Malaysia. CCB also operates an automobile supermarket selling Proton, Isuzu, Kia, Hyundai, Hicom and Inokom motor vehicles. The company holds 49% in DaimlerChrysler Malaysia S/B (DCM), the sole distributor of Mercedes motor vehicles in Malaysia. Out of the current 3 Mercedes dealers in Malaysia, CCB is the largest in the country, with sales representing close to 50% of Mercedes sales in Malaysia.

CCB used to be involved in assembling motor vehicles (Mercedes C and S-Class and commercial vehicles), and assembling Mercedes engines (C, E and S-Class), and property investment. However, the assembly operations ceased in 2005 with the early termination of assembly contracts by DCM. CCB received RM10.9 mln compensation from the termination. As for property investment, the operation ceased with the disposal of Menara Weld in 2004 and Wisma Cyclecarri in Jan 2005.

[2]. DRB-HICOM (DRBHCOM, 1619)

Nature of business: Conglomerate.
Major shareholder/s: Etika Strategi S/B APF, Khazanah Nasional, Skim ASB.

Table 3: Summary of performance (RM mln) - 31 March

With approximately 76 operating subsidiaries, DRB-H COM's (DRB) vast businesses can be categorised into 3 core divisions, being [a]. Automobile manufacturing, assembly, distributing and manufacturing automobile parts and components; [b]. Property development and construction; and [c]. Services. As shown in table 3 above, automobile division contributes 54% of the group's sales and 75% of the group's operating profits (not counting the huge contribution coming from its associates).

[a]. Automobile manufacturing & assembly
DRB owns 80% in the lesser known, third national automobile project, Malaysian Truck & Bus S/B (MTB), the manufacturer of the Perkasa range of trucks that are based on the Isuzu Elf models. MTB also assembles commercial vehicles for Isuzu, Mitsubishi, TATA, Ssangyong, and Mercedes and passenger cars for DaimlerChrysler Malaysia (Mercedes Benz E, C and S-Class).

Another automobile-related entity that is owned by DRB is DRB-HICOM Defence Technologies S/B (Deftech), set up in 1996 to repair, refurbish and upgrade military vehicles for the Malaysian Armed Forces. Deftech is also involved in manufacturing IVECO buses and is a sales and maintenance agent for Agusta helicopters. DRB also owns a 93% stake in Automobile Manufacturers S/B, a contract assembler for Kia vehicles, and a 34% stake in Honda Malaysia S/B, the manufacturer and distributor of Honda 4-wheelers in Malaysia.

[b]. Automobile importation, distribution and retailing
Amongst the many motor vehicle distribution rights held by DRB include rights from Suzuki, Mahindra, Citroen, IVECO, Isuzu (heavy duty commercial vehicles), and HICOM Perkasa. Other than distributorship rights, DRB also holds dealership rights for Mitsubishi Fuso commercial vehicles (with carrying capacity of 3 tonnes and above) and Chevrolet motor vehicles. DRB owns 49% of Isuzu Malaysia S/B (importing, assembling and distributing Isuzu light commercial vehicles in Malaysia) and 29.31% in Edaran Otomobil Nasional Bhd.

[c]. Manufacturing of motorcycles
The group owns 55% of Motosikal Dan Enjin Nasional S/B (Modenas S/B), the manufacturer and distributor of Modenas motorcycles. For financial year 2005, Modenas S/B contributed RM461 mln to DRB's sales and RM54 mln to pretax profit. With 103,391 units of motorcycles sold out of the industry sales of 398,862 units, Modenas was the 2nd best selling motorcycle in the country in 2005. Overseas sales, mainly to Indonesia, Greece, Turkey, Cambodia and Iran, reached 5,911 units in 2005.

[d]. Manufacturing of automobile spares and related components
Subsidiaries of DRB that have involvement in this category of business include HICOM-Teck See Manufacturing Malaysia S/B (manufactures automobile plastic parts in Malaysia and Thailand), Oriental Summit Industries S/B (manufactures metal stamping components for Proton and Perodua), PHN Industry S/B (manufactures metal-based automotive components for Proton, Perodua and Honda), HICOM Diecasting S/B (manufactures automobile diecast parts for Proton, Perodua, Kayaba, etc) and HICOM Engineering S/B (manufactures cast iron parts). These 5 main subsidiaries contributed RM592 mln to the group's sales in financial year 2005.

In addition, the group also has associate companies involved in this division, such as Siemens VDO Instruments MY S/B (a 33.33% associate that manufactures instrument panels, speedometers, etc), ZF Steerings (Malaysia) S/B (a 30% associate that manufactures mechanical and pinion steering system), and TRW Steering & Suspension (Malaysia) S/B (a 20% associate that manufactures suspension ball joints, steering linkages, etc). Other than these, DRB is also involved in manufacturing motorcycle parts and components through jointly controlled entities with Yamaha, Honda and Suzuki for both domestic and export markets.

The second core division of the group is property development & construction, contributing 8% to the group's sales (or RM232 mln) for the 9 months ended 31 Dec 2005 and had operating losses of RM171 mln for the same period. The third core division of the group, namely the services division, contributed RM960 mln to the group's sales and RM96 mln to operating profits for the 9 months ending 31 Dec 2005. This division houses diverse businesses, which include underwriting of general and life insurance (under the Uni.Asia group), solid waste management (Alam Flora S/B), vehicle safety certification (PUSPAKOM), etc.

[3]. Edaran Otomobil Nasional (EON, 4774)

Nature of business: Distribution and retailing of motor vehicles.
Major shareholder/s: HICOM Holdings Bhd, Jardine Strategic Malaysian Investment Pte Ltd, Kualapura (M) S/B, EPF, Khazanah Nasional Bhd.

Table 4: Summary of performance (RM mln) - 31 December

Established as the distributor of Proton in 1984, Edaran Otomobil Nasional (EON) today is a dealer for Proton (super dealer status), Mitsubishi, and Hyundai/Inokom (mega dealer status) motor vehicles, and a distributor of Audi cars. The group also owns 48% of Mitsubishi Motors Malaysia S/B, the distributor of Mitsubishi motor vehicles in Malaysia. Other than vehicle distribution and retailing, EON is also involved in automobile parts and components manufacturing via its associate Johnson Controls Automotive Holding (M) S/B, a manufacturer of car seats, seat padding, steering wheels, and other car interior parts. Proton Parts Center S/B, EON and Proton's jointly controlled entity, in which EON holds a 40% stake, is involved in warehousing and distribution of automobile parts and accessories.

[4]. MBM Resources (MBMR, 5983)

Nature of business: Trading & distribution of motor vehicles.
Major shareholder/s: Med-Bumikar Mara S/B, EPF.

Table 5: Summary of performance (RM mln) - 31 December

Listed in 1995, MBM Resources (MBMR) is a [a]. Distributor of Daihatsu motor vehicles; [b]. Dealer of Perodua and Volvo motor vehicles; [c]. Manufacturer of automobile related parts (steel wheel rims for four-wheeler, carpets, headliners, etc); and [c]. Repair, touch-up & re-construction of motor vehicle body parts. The assembly of Daihatsu's Completely-Knocked-Down (CKD) packs are outsourced to third parties.

The dealership of Volvo motor vehicles was added to the group's portfolio when MBMR increased its stake in Federal Auto Holdings Bhd (FAH), the largest dealer of Volvo motor vehicles with 7 outlets, from 32% (associate) to 69.64% (subsidiary) in Dec 2005. Currently, the group is undergoing the acquisition of a 42% stake in Hino Motors (Malaysia) S/B, the sole distributor of Hino motor vehicles in Malaysia. The acquisition is expected to be completed by the end of 2006.

MBMR also holds a 78% equity stake in Oriental Metal Industries (M) S/B (OMI), the sole manufacturer of steel wheels locally and an effective 23.6% stake in Perusahaan Otomobil Kedua S/B (POK). POK is the sole distributor of Perodua motor vehicles and owns 49% equity interest in Perodua Auto Corporation S/B, the manufacturer of Perodua motor vehicles. 95% of the associates' contribution comes from POK.